Onshore Chinese markets were headed for a third day ofgains, reversing slim early losses after a private preliminarysurvey of manufacturing activity in the world's second-largesteconomy in March came in higher than expected.

The Shanghai Composite Index and the CSI300 of the leading Shanghai and Shenzhen listings eachwent into the midday trading break up 0.4 percent. Both indexeshad their best gain in two months on Wednesday.

The Hang Seng Index was flat, while the ChinaEnterprises Index of the top Chinese listings in HongKong slipped 0.1 percent in relatively modest turnover.

"Tencent's stock price is obviously hurt by those downgradestoday, but there are some people who are buying on dips," saidAlex Wong, Ample Finance's director of asset management.

"There might be some short term hiccups with the company'sgrowth, but there are not many Chinese companies with afavourable long term growth story like Tencent," Wong added.

DB analysts downgraded Tencent from "buy" to "hold" whiletrimming its target price by 8 percent, citing near-term marginpressures from its mobile and e-commerce initiatives that wouldbear fruit in the longer term.

EARNINGS LOOM

China Unicom was down 1.1 percent ahead of its2012 full-year earnings, due after markets close on Thursday.Down 16 percent this year, Unicom is currently trading at a 9.3percent discount to its historical median forward 12-monthearning multiple, according to Thomson Reuters StarMine.

In the last 30 days, 4 of 29 analysts have downgraded their2012 full year earnings-per-share estimates for Unicom by anaverage of 2.6 percent, according to StarMine.

Global supply chain manager Li & Fung climbed 1percent ahead of its 2012 earnings later in the day. The stockis down 23 percent this year, and was trading at a 25 percentdiscount to its historical median forward 12-month earningsmultiple, according to StarMine.